Monday, April 18, 2011

ENGlobal Corporation (NASDAQ: ENG) Q2 2011 Price Target

Recent price: 3.98$
P/E Ratio: -
3 Months Target Price: 4.50$

Company Description
According to Reuters, ENGlobal Corporation, incorporated in June 1994, is a provider of engineering and professional services principally to the energy sector. The Company operates through four business segments: Engineering, Construction, Automation and Land. The Engineering segment provides consulting services relating to the development, management and execution of projects requiring professional engineering and related project services. The Construction segment provides personnel and services primarily in the areas of inspection, and also in the areas of construction and construction management, mechanical integrity, vendor and turnaround surveillance, field support, quality assurance and plant asset management. The Automation segment provides services related to the design, fabrication and implementation of process distributed control and analyzer systems, advanced automation, information technology and heat tracing projects.

Confidence Margins
Strong resistance $5.68 (+43%)
Light resistance $4.92 (+24%)
Light support $3.45 (-13%)
Strong support $3.20 (-20%)

ENGlobal Co. last announced its quarterly results on Thursday, March 10th. The company reported ($0.02) earnings per share (EPS) for the previous quarter, missing the Thomson Reuters consensus estimate of ($0.01) EPS by $0.01. This is a huge miss and investors were quick to sell their shares. Following the announcement, a downgrade by Zack's Investment Research came to send the stock further down.

Entry strategy
For the cautious investor:
Buy the stock for 4.10$ or less. This is a good entry point, but keep in mind that the light support is still quite a fall down.

For the risk-taking trader:
The June 2011 5$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 25$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 4.50$, or keep it until 5.50$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 4.50$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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